Tom Kelly - Real Estate Today

Hitting the Road?

2004-09-05T22:37:00.000-07:00

Take time to winterize before relocating

February is a great month to watch the traditional "Snowbirds" take flight. Thousands of boomers and seniors, not unlike real migrating birds, will head to warmer environs in recreational vehicles or setup shop in a second home. Retirees, and those quickly getting to the stage where they can work in any place they choose, will pack up their laptops and golf clubs with the hope that their part-time work will not interfere with strategic tee-times.

While that winter life may seem too good to be true, the lifestyle is not just popular among Midwest and East Coast Americans. For example, The Conference Board reported that Canadians, many of them full-time residents of Vancouver, Montreal and Toronto, spent $537-million in Florida alone during the first three months of last year - an increase of 21 per cent from the first quarter of 2002.

Before you, or your parents, hit the road make sure that your family home is prepared for your exodus. For example, before you drive away, double-check to be sure all doors and windows are locked and light timers are set. Make sure you've provided relatives or friends with your contact information so you can be reached in an emergency.

Safety, and money, have become huge domestic issues especially given the rising cost of insurance policies. Most of the time, claims can be avoided. Insurance companies report that most homeowner claims are not caused by fires or storms, but by neglected maintenance that grows into a larger problem. Here are a few of the easiest things to help you get your home in shape - that do not take a lot of muscle and elbow grease or significantly delay your expected time of departure:

· Inspect entry doors and doorframes. External doors should be hinged from the inside, not the outside where burglars can simply un-screw the hinge. Ideally, entry doors should have deadbolt locks. If you have sliding doors, place a bar or wooden dowel in the inside track to supplement the door lock.

· Use indoor and outdoor lighting as a deterrent. Walk around the perimeter of your home and objectively evaluate its vulnerability. Try to look at it the way an intruder or thief would, and make changes well before you leave town. Replace burned out or dim light bulbs. Re-position security lights so they shine on key areas.
· Check to make sure all window locks are operable and replace or install any that are lacking or in disrepair.

· Purchase several interior light timers so you can set lights to come on in different rooms at different times during your absence.

· The rubber hoses that come with most washing machines eventually leak, and since the laundry room is usually in a low-traffic area of the house, the water damage can go undetected and be extensive. Replace rubber hoses every three years or replace with metal mesh hoses from any hardware or home store.

· Don't forget the garage. Check garage doors and windows for security and replace worn or inoperable locks. If the window is bare, install a blind or curtain over the inside so the contents cannot be viewed from outside.

· Do yard work before you leave. Trim limbs that could be used to access upper windows. Keep hedges neat and pruned. Clean up debris piles and put away ladders and any other equipment you may have left outside. If you have a gasoline container, keep it locked in a shed or garage.

There's plenty of free information available about taking care of your home before you take off. For example, the Home Safety Council (http://www.homesafetycouncil.org), a North Wilkesboro, N.C.-based organization focusing on home safety and education, offers useful consumer and insurance tips.

Remember, if you won't be back for a while, try to guard against the possibility of returning to a preventable problem. The effort will put more energy into your golf swing.

Taking the House Pledge

2004-09-05T22:06:00.000-07:00

Creative ways grandparents can help first-time buyers

My folks said I would get a bed and a desk. That was it, and don't expect anything more.

They hammered home the value of education and saved and borrowed to put seven (count 'em, 7) Kelly kids through school. And, they were very clear about what to expect after that.

The well had more than run dry, so any "help" remained would be those two pieces of furniture, if you wanted them.

"In fact,'' my mom would say, "why don't you just come and get them now so we don't have to call St. Vinny's?''

A lot of parents always seem to be willing to help their children, but how many folks can now realistically plop down their retirement nest egg into their hands of their children so the kids can buy their first home? There are future medical bills to consider, not to mention housing costs in retirement and that long-awaited trip to St. Somewhere.

It's common knowledge that saving for a down payment is the deepest, widest chuckhole on the road to home ownership. Local lenders and huge national loan purchasers have done much creative writing to lower down payments, especially for first-time homebuyers.

For example, Fannie Mae, the country's largest provider of home mortgage money, and many smaller portfolio banks, are now accepting "pledged asset" loans where the folks - or another relative - can help the kids buy a home without actually spending their nest egg. Very little out-of-pocket cash is needed to close the loan, resulting in no down payment for the total cost of the home - or what's known as 100 percent financing.

"It's a popular deal for grandparents,'' said Jim Moran of World Savings, one of the country's largest lenders and a funder of pledged asset loans. "Grandparents often are in a place where they are move able to help.''

Here's how the 100 percent pledged asset loan works: A relative uses a retirement nest egg, or other asset, and moves it in the form of a certificate of deposit into a World Savings account - or another lender offering pledged asset loans. The amount of the CD must be equal to 20 percent (programs vary) of the home value. Parents, grandparents, aunts, uncles, sisters and brothers are eligible to sponsor. Sponsors receive a monthly check for interest accrued on the CD.

"In the case of a grandparent,'' Moran said, "even though they be on a fixed income, they like the idea of getting that monthly interest check. As long as they don't actually have to spend the funds, they are more willing to participate.''

The entire down payment does not have to be in CD form. The borrower's own cash can be used, too, as long as the loan-to-value ratio is brought down to 80 percent. Any combination of cash and CD is acceptable.

For example, let's suppose you want to buy a starter home for $150,000 and you have no cash. World Savings will loan you the entire amount as long as any primary family member takes out a certificate of deposit of $30,000 for one year or longer. All interest earnings on the CD will belong to the sponsor who made the deposit. The CD must remain on deposit until the home is sold, refinanced or the equity buildup reaches 25 percent of the home's value.

"In areas where homes are quickly appreciating, we can go in and do an appraisal and get the sponsor out of the deal faster than anybody thought,'' Moran said. "These types of programs really have more flexibility than first thought.''

Typically, no private mortgage insurance will be required and only owner-occupied purchase transactions for single-family residences and condominiums are permitted. Depending upon the lender and program, fixed-rate loans (30-year or 15-year term) or shorter term, adjustable-rate mortgages are available.

"We will also accept up to three sponsors on the same loan,'' Moran said. "Many people don't have enough to cover the amount of the down payment by themselves, so two other family members can chip in. This gives the program more options because more people are able to participate.''

Some programs also have a "self-sponsored" wrinkle. This could benefit a home buyer who, instead of refinancing the home to take cash out down the road, could forgo the costs of refinancing and have a CD released as soon as the loan is paid down or the home rises in value.

With lenders now exploring all options to increase their share in the highly competitive home-loan market, expect more angles from pencil sharpeners in the creative product division.

But I like this three-sponsor idea. When it comes time, I think I'll stick my kids on their uncles and aunts.

Tom Kelly, former real estate editor of The Seattle Times, is a syndicated columnist and talk show host.

About Tom

2004-09-04T20:16:00.000-07:00

Tom Kelly has been a professional journalist for 31 years. He served The Seattle Times for 20 years, many as Real Estate Editor. Tom's weekly real estate column, now being syndicated nationally, is featured in The Los Angeles Times, St. Louis Post Dispatch, Oakland Tribune, Houston Chronicle, Rocky Mountain News, Louisville Courier, Sacramento Bee, Tacoma News Tribune, Reno Gazette-Journal and dozens of other newspapers. The column typically focuses on residential mortgage and tax options for Baby Boomers and Retirees, providing consumer tips and helpful hints as well as explaining concepts and terms in a friendly, understandable style.

Tom's latest venture is a book co-written with John Tuccillo, former chief economist for the National Association of Realtors. "House a Second Home Can Be Your Best Investment Shelter" (McGraw-Hill) explores how one additional property - for investment, recreation or retirement - can serve all three purposes over time.

Tom's award-winning radio show "Real Estate Today" recently began its 11th year on 710 KIRO-AM, the CBS affiliate in Seattle and the state's largest station. The show is now aired in approximately 35 US, markets and is syndicated by Business Talk Radio. The program, which provides on-air advice to callers, can be heard from 11 A.M.-Noon (Pacific) Sundays live and on the Internet, and is tape-delayed by Armed Forces Radio to more than 450 stations in 160 countries around the world.

Tom was president of the Santa Clara University class of 1972, graduated with a Bachelor of Arts degree in English Composition and was a three-year letterman in rugby.